Vietnam's Durian Export Success Highlights China's Regional Influence Cannot Be Ignored

tendata blogTrade Trends News

ten data blog20-09-2023

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Like a motorcycle navigating the crowded streets of Ho Chi Minh City, Vietnam has been put on the fast track to becoming an indispensable bridge between China and the United States and a key player in the supply chain center.

Its strategic significance is bound to increase as more and more US companies exit China but remain keen to maintain a presence in Asia.

Southeast Asian economies have inadvertently benefited from U.S. initiatives to counterbalance Chinese influence in the region and diversify trade partnerships. The fact remains, however, that China's influence is still significant given Vietnam's dependence on China.

As Phan Tuan Quang, an associate professor at the University of Hong Kong's business school, put it, China "has a key role to play with its southern partners".

Recently, trade between Vietnam and China has taken on a distinctly Asian flavor, which has helped cement economic ties. Chinese consumers have become major buyers of the durian, a smelly, prickly fruit also known as the "king of fruits," and it is becoming one of Vietnam's most exciting exports.

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Global durian sales have been rising for the past nine years, with much of it consumed by hungry Chinese. According to the World Trade Organization, global durian imports in 2022 will reach US$4.66 billion, of which 86 percent will go to China.

Traditionally, Thailand has exported most of its durians to China, but that is starting to change when Vietnam exported its first fresh durians to China in 2022 after years of negotiations. The latest figures show that in the first half of this year, Vietnam exported $876 million worth of durians to the world, 95 percent of which went to China.

Durian sales have not been affected by China's economic slowdown, given the middle class' growing appetite for the spicy fruit. "Demand is still far outstripping supply," says Joseph Ngui, founder of Malaysian agricultural company EcoCrop. "In a difficult economy, durian is still seen as an affordable luxury." Ngui's company is currently exploring investment opportunities in durian farming in Vietnam.

China's love affair with durians has even managed to survive the Covid-19 pandemic, with imports jumping from $1.6 billion in 2019 to $4.21 billion in 2021 - during a period when most mainstream industries have lower demand for other products.

While people's taste for durian is starting to grow in other world markets, the shorter distance between China and Vietnam means cost savings from a logistics perspective.

Some consumers prefer downstream products such as durian ice cream and cakes because they are less odorous. However, there is still a stigma attached to the fruit and many people are still unsure if durian is banned in their country. It has been banned in many public places due to its odor.

The durian love affair between China and Vietnam is a good example of how China's influence in the region cannot be underestimated, even with the growing relationship between the United States and Vietnam.

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U.S. President Joe Biden's recent symbolic visit to Hanoi, where he declared the two countries to be key partners, will strengthen the alliance. However, for Vietnam to further develop and maximize the benefits of this partnership, it must also build stronger economic ties with China.

After all, according to the Observatory of Economic Complexity, China's exports to Vietnam have jumped at a rate of 22.1% per year, from $718 million in 1995 to $129 billion in 2021.

It is only recently that China's exports to Vietnam, and the rest of the world, have begun to decline as the country faces economic headwinds due to a declining population, slow productivity growth and falling global demand.

In addition, Hanoi must rely on Chinese imports to support its sales of goods to the U.S., especially in important areas such as cell phone manufacturing. Vietnam could become the world's third-largest cellphone maker by 2022, but it still needs China to make complex components.

Once shipped across the border, Vietnam typically takes advantage of its cheaper labor market to complete the final stages of the manufacturing process. This supports the growing preference of US consumers for goods made in Vietnam over those made in China. This is further illustrated by U.S. tech giant Apple's decision to diversify its manufacturing base by moving out of China and producing MacBooks in Vietnam.

Vietnam's delicate balance between the economic powerhouses of the US and China is similar to a carefully cultivated durian. It is complex and layered, but if managed correctly, it can yield lucrative rewards. Vietnam's strength in the global trade landscape exemplifies the fruits of shrewd diplomacy and economic strategy.

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 2023, let us work together to break the shackles of the epidemic! In the future, let's work with Tendata to explore new opportunities in the sea!

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